Processed fabrics valuation follows Ujagar Prints formula; shrinkage loss cannot be added without evidence of an incorrect declared price.

Processed man-made fabrics must be valued under the Ujagar Prints formula, using the grey cloth value in the processor's hands plus job-work charges, manufacturing expenses and manufacturing profit, not the trader's later profit. On the facts, the majority found no evidence that the trader-supplied declared selling price was incorrect or that shrinkage loss had been ignored, so shrinkage could not be added merely by assumption. The matter was nevertheless remanded for fresh quantification of differential duty and penalty, leaving the arithmetical working to the original authority.

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Issues: (i) whether the assessable value of processed fabrics could be determined on the basis of the trader-supplied declared selling price without separately adding shrinkage loss, and (ii) whether the extended period of limitation and penalty were attracted, with consequential remand for quantification.

Issue (i): whether the assessable value of processed fabrics could be determined on the basis of the trader-supplied declared selling price without separately adding shrinkage loss.

Analysis: The valuation of processed man-made fabrics had to be tested in the light of the Supreme Court's rulings in Ujagar Prints, which treat the assessable value as the value of grey cloth in the hands of the processor plus job-work charges, manufacturing expenses and manufacturing profit, while excluding subsequent trader's profit. The majority found that the Revenue had not shown that the trader's declared selling price was incorrect or that any higher price had actually been charged. On the facts, the declared selling price already reflected the commercial costing adopted by the supplier, and the assumption that shrinkage had not been taken into account was held to be unsupported by evidence. The Member (T) dissented, holding that shrinkage had to be factored into the intrinsic value of the grey fabric and that the trader's price was not the relevant basis.

Conclusion: The majority held that the demand could not be sustained on the basis of adding shrinkage loss to the declared selling price, and the issue was decided in favour of the assessee on valuation.

Issue (ii): whether the extended period of limitation and penalty were attracted, with consequential remand for quantification.

Analysis: The majority did not finally decide the limitation and quantification questions independently because the appeal succeeded on the valuation issue and the matter was sent back for working out the exact duty and penalty, while the dissenting and concurring views recorded that suppression and limitation were established. The final order therefore left the arithmetical determination of duty and penalty to the original authority in the remand proceedings.

Conclusion: The matter was remanded for fresh quantification of differential duty and penalty; the majority view accepted the Revenue's objection on remand and limitation-related consequences.

Final Conclusion: The assessee did not obtain a complete final relief on all issues, because the determination of duty liability and penalty was sent back for recomputation in accordance with the majority view.

Ratio Decidendi: For processed fabrics cleared on the basis of the trader's declared selling price, assessable value must be determined by the governing Ujagar Prints formula, and shrinkage cannot be added merely on assumption unless the declared price itself is shown to be incorrect.

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